The Porter Framework

McIntire Investment Institute

Presented by Michael Rosete

What is the Porter Framework?

• Technique developed by Michael Porter • Used to assess the competitive position of a company • Reveals how customers, suppliers, potential entrants, and substitute products are less obvious competitors

Threat of New Entrants Supplier Power Industry Competition Buyer Power Threat of Substitutes

Threat of New Entrants

Supplier Power Industry Competition Buyer Power Threat of Substitutes

May I Play?

• Also known as Barriers to Entry • Economies of scale • Product differentiation • Capital intensity • Government policy

Threat of New Entrants

Threat of New Entrants

Supplier Power

Industry Competition Buyer Power Threat of Substitutes

Supplier Power

Bargaining Power

• Determine pricing and quality • Switching costs • Number of available suppliers • Forward integration

Threat of New Entrants Supplier Power Industry Competition

Buyer Power

Threat of Substitutes

The Other Side

• Buyer concentration • Product differentiation • Switching costs • Value added • Backward integration

Buyer Power

Threat of New Entrants Supplier Power Industry Competition Buyer Power

Threat of Substitutes

Alternatives

• Price/Performance tradeoff • Current and future • Switching costs • Substitute improvement

Threat of Substitutes

Threat of New Entrants Supplier Power

Industry Competition

Buyer Power Threat of Substitutes

Rivalry

• Number of competitors • Industry growth • Product differentiation • Competitor diversity • Exit barriers

Industry Competition

Threat of New Entrants Supplier Power Industry Competition Buyer Power Threat of Substitutes

Recap

• Systematic industry and competitive analysis • Customers and suppliers are friends and foes • Always worry about new entrants and substitutes • NEVER think that competitors do not exist

Any Questions?

Thank you.